In the world of technology, online learning has been one of the biggest beneficiaries in recent months. People stayed at home and away from their normal routines due to the coronavirus pandemic, using this time to broaden their knowledge or to be more critical in figuring out what to do next when they want to change their careers or are out of work.
Now one of the startups that is building a business around virtual computer science education and teaching people who sit at home before it became a mandate is announcing a large round of funding to capitalize on that demand.
Lambda School offers nine- and 18-month (part-time) virtual computer science courses for $ 30,000 that currently cover data science and full-stack web development. Payments for the course are based on a season that won't begin until after you land.A job that brings in at least $ 50,000 raised $ 74 million in equity in a Series C round.
Most of the investment comes from Gigafund, the VC that was launched by former Founders Fund partners in 2017 to originally put more money into SpaceX, with Tandem Fund and Y Combinator (where Lambda School was incubated) also participating. The list of other supporters includes GV, GGV, and Stripe. (Tommy Collison, director of business development at Lambda, is the younger brother of the two Collison brothers who co-founded Stripe.)
Lambda School is not disclosing its rating, but CEO Austen Allred (who co-founded the company with Ben Nelson) confirmed it is higher than the $ 150 million Lambda got in its $ 30 million Series B January 2019. He also said that he hopes this will be the last funding Lambda will raise, not because it is planning an IPO, but because it is aiming to become profitable. Allred confirmed that this is not yet the case.
Allred added that it plans to use the funds to help the startup meet the increasing demand for its courses.
"There is more demand than we can handle right now, even with the fundraiser," he said. "I don't know if that's good or bad." There are currently around 3,000 students enrolled, taking all live courses (not on demand) according to the timetables programmed for different time zones.
The money will be used specifically to further expand the offerings of the Lambda School, both in terms of content and potentially also in relation to the development of its business model.
Case in point: Just yesterday, the startup was approved by the California Bureau of Private Post-Secondary Education after Lambda struggled for an extended period of time with the office where Lambda stopped teaching in the state and was fined.
Part of the licensing deal, however, was that Lambda stopped offering the students income-sharing agreements, at least for now. With ISAs as the cornerstone for the company's presentation of the deferred payment model, Allred said Lambda is still working on making ISAs available but is also looking into "student-friendly substitutes" in the meantime.
To be clear, approval by this board of directors is not synonymous with accreditation: Lambda School does not offer official degrees, but certificates when students complete the courses. There is currently no plan to get accreditation for offering degrees, Allred said.
"From a regulatory perspective, we could get accreditation and graduate degrees, but (bodies) require you to submit curriculum changes a year in advance, and our students cannot afford that." Such things are not a beginner until the accreditation bodies change their requirements, ”he said, adding that accredited schools are not always better.
"There are thousands of fully accredited schools with a 20% graduation rate," he said. "It doesn't make you good. We have to prove our worth to the students in other ways, usually through results."
The Lambda School's funding may come from the increased demand for their courses – and the interest in online education companies in general to continue learning even near the schools – but that doesn't mean it wasn't a difficult time for either the start.
In April, Lambda 19 cut employees and executives by 15% due to market uncertainty due to the coronavirus pandemic (and possibly to sharpen its accounts, which happens regularly when startups are raising money). The company currently has a team of around 150 employees, which includes operations and support staff as well as course teachers and team leaders (mainly teaching assistants). Everyone is working remotely at the moment, Allred said.
But even before April, Lambda had a lot of negative opinions about how the business model for payment deferrals is applied. Critics have described the process of paying back fees based on your income as indentured servitude and predatory. And they claim the business model is impractical because Lambda itself takes the risk if students fail to earn their expected salaries, as the ISA model provides amortization based not only on salary but also on a limit of 24 months to to repay the fees, which means some students will pay back the full $ 30,000 and some will not:
Allred did not reveal how many late payments there are, but said that about 15% of students drop out before the end of the first month, which means they don't pay anything at all.
This may be a sticking point for some people, but it is not enough to curb the startup's growth or investor interest when others in the field like Coursera, Vedantu, Kahoot, and many others are also getting large funding.
"We were interested in Austen as CEO," said Stephen Oskoui, a Gigafund partner who is joining the Lambda School board, in an interview. “Gigafund is very focused on the strength of those who we believe will be built over several decades The model of how Lambda School works has the potential to be huge. "